FINANCIAL LITERACY AND RISK ATTITUDES OF SELECTED SME OPERATORS IN LAGOS STATE

Abstract

This paper is aimed at examining the impact of financial literacy on risk attitudes (in terms of how much SME operators are willing to take up risks to ensure continued existence and sustainability of their businesses when they possess financial capability) of SME managers/ operators in Lagos state.  SMEs contribution to economic sustainability cannot be overemphasized. A vital instrument to the sustainability and profitability of the small and medium scale business is financial literacy. Financial literacy is believed to be a good predictor of financial performance because of its role in helping entrepreneurs make responsible business decisions as they attempt to increase and improve their financial well-being, and it also has an indirect influence via associations with access to finance and financial risk attitude.  The population for this study consisted of the total number of registered SMEs recorded in Lagos State as at 2023 at 11,643. The sample size was determined using the Taro Yamane’s (1967) formula. Thus, single-stage cluster and convenience sampling techniques were employed in the questionnaire distribution and data collection processes. Descriptive survey design was adopted in the study. Findings from the study show that though financial knowledge, financial planning, and financial experience attract/influence risk attitudes among SMEs in Nigeria, they have no significant joint effect on entrepreneurial risk attitudes. However, expanding individual’s financial knowledge and experience in financial instruments attracts reasonable entrepreneurial risk attitudes which in turn create confidence, trust and competence of both the SME operators and business partners.

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